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Thursday, August 02, 2012

China unveils oil offensive in South China Sea squabble

SINGAPORE/BEIJING (Reuters) - First came the diplomatic offensive, then the flexing of military muscle.

Now, China is opening a third front to assert its claims in the South China Sea - moving ahead with its first major tender of oil and gas blocks in disputed parts of its waters.

China National Offshore Oil Corp (CNOOC), a state oil giant, invited foreign firms in late June to bid on oil blocks that overlap territory being explored by Vietnam, putting the 160,000 sq km of water on offer at the forefront of Asia's biggest potential military flashpoint.

Oil companies have until next June to decide whether to bid for the nine blocks, said a Chinese industry source with knowledge of the matter. CNOOC, parent of Hong Kong-listed CNOOC Ltd <0883 .hk=".hk">, has received many informal enquiries from foreign oil companies, added the source, who did not want to be identified.0883>

Beijing claims almost all the South China Sea, a body of water believed to hold rich reserves of oil and gas and which stretches from China to Indonesia and from Vietnam to the Philippines. Vietnam, the Philippines, Taiwan, Brunei and Malaysia claim parts of it.

Any conflict in the sea, one of the world's busiest trade routes, would have global repercussions given the $5 trillion in ship-borne trade carried on its waters each year.

"The Chinese government's stance is clearer than ever ... They want to take on and develop this region," said an executive at a global oil major, who declined to be identified because of the sensitivity of the matter.

The Philippines put two disputed blocks on offer on Tuesday but only received three separate bids for exploration rights, an indication that there was little appetite to go up against China in the South China Sea.

"China's view is that the little countries, like Vietnam and the Philippines, are increasingly stealing its resources and it must demonstrate it is serious about upholding its claims," said Ian Storey, a senior fellow at the Institute of Southeast Asian Studies in Singapore.